Volatility Risk Ahead with Key US Data
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Traders Waiting on US Data
The US dollar has been higher over the European morning so far on Wednesday. Some of the losses posted on the back of a weaker-than-expected manufacturing reading on Monday have been recovered. Later today, traders will get the ISM Non-Manufacturing reading. As this indicator reflects a much larger portion of the economy, there is the potential for further volatility. The USD index is currently testing the 97.69 level from above.
EUR Lower on USD Recovery
EURUSD has been lower again, weighed on by the recovery in USD. A very quiet week for Eurozone data is keeping EUR flows linked to USD action for now. Earlier in the week, new ECB head Lagarde told European parliament that the ECB will remain resolute in its goal of achieving 2% inflation. Lagarde’s comments have further encouraged the market view that the ECB will ease again in the coming months. EURUSD trades 1.1073 last.
GBP Breaks Resistance
GBPUSD has softened a little over the early European session today. Although it has been much firmer over the last 24 hours. Price broke above the 1.3033 resistance to trade levels not seen since May. Pre-positioning ahead of the UK elections is driving much of the action in GBP currently. With a hung-parliament the most likely outcome, traders sense that Brexit will more than likely end up being delayed once again. This is supporting GBP in the near term.
Risk assets have posted a recovery so far today. The SPX500 has climbed off its recent 3069.48 lows to trade 3105.18 last. Risk sentiment was rocked earlier in the week over fears that the US/China trade deal would likely be delayed. This comes as a result of tensions between the two countries over the Hong Kong protests. However, China’s media is reporting that a deal is still close. This is bolstering sentiment again in the middle of the week.
JPY & Gold Down
Safe havens have been weaker today, as a result of the emerging recovery in equities, seeing both JPY and gold lower against USD. XAUUSD trades 1475.93 last, with price having quickly retreated back under the 1481.93 level. This comes following a brief move above the level yesterday. USDJPY trades 108.74 last, making its way back up towards the 108.84 level broken on the sell-off earlier in the week.
Crude Higher on OPEC Expectations
Oil prices have been firmer today in light of the recovery in risk sentiment. Yesterday, the API reported an unexpected drawdown in US crude stores. If this move is confirmed by the main EIA report released later today, this could further boost oil prices. Traders are anticipating that OPEC will announce further supply restrictions when it meets at the weekend. This is also keeping oil supported here. Crude trades 56.91 last.
CAD Climbs on Oil Rally
USDCAD has been lower today, extending yesterday’s losses. The move higher in oil prices is boosting CAD here, with USDCAD trading back down at 1.3208. The market is waiting on the BOC rate decision today. No change in policy is expected though traders will be keen to receive the bank’s latest assessment and guidance which is likely to signal the need for further easing in the near future.
AUD Lower on GDP Miss
AUDUSD has been weaker over the European session so far on Wednesday. The recovery in USD has weighed on AUD here with price trading back at .6826, just short of testing the bearish trend line. While above the .6779 level, the focus is on a further move higher. GDP data came in weaker than expected overnight, which has taken some of the topside momentum out of the Aussie here.